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SICAV
Global Natural Resources Equity Fund
A broadly diversified portfolio of around 90-120 stocks of natural resources or commodities-related companies. The universe includes companies that own or develop natural resources and other basic commodities and companies both upstream and downstream in the supply chain.
ISIN LU0272423913
View more information on risks
FACTSHEET
KID
31-Jan-2020 - Shawn T. Driscoll, Portfolio Manager,
We believe the global commodities market is in middle of a long-term, secular downcycle. Although countercyclical rallies in oil prices can occur, we believe any periods of outperformance will likely be brief, due to a declining cost curve and the disruptive effects of short-cycle shale production. Nevertheless, we continue to find pockets of opportunity in several areas of the market.

Overview
Strategy
Fund Summary
Our approach involves assessing resource/commodity cycles, industry valuations, and company fundamentals. The focus is on identifying well-managed companies with attractive long-term supply and demand fundamentals. We broadly diversify holdings for more consistent returns potential and lower volatility than highly concentrated energy or gold strategies. The manager is not constrained by the fund's benchmark, which is used for performance comparison purposes only.
Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Apr-2024 - Shinwoo Kim, Portfolio Manager,
Natural resources equities fell in April. Concerns about the conflict in the Middle East spreading across the region and elevating risk to supply over the near-term dissipated. Global supply remained ample, further limiting the conflict’s impact on oil prices. Within the portfolio, stock selection in integrated oil and gas added value. Shares of one of our core Brazilian holdings moved higher during the month after it announced a successful oil field discovery in Namibia. Stock choices in US oil exploration and production also benefitted returns. In US, mixed exploration and production is heavily exposed to natural gas, which rose as production is expected to slow as we enter a hotter-than-usual summer. This in turn will increase demand for air conditioning purposes. Conversely, stock selection in paper and forest products detracted. The industry fell on diminishing lumber demand and strong supply, as the continued rise in mortgage rates has increased the cost of borrowing and slowed the housing market. An overweight allocation to oil and gas equipment and services also hurt as falling oil prices pulled down the entire industry. We remain constructive on offshore capacity growth amid a larger spending cycle.
30-Jun-2022 - Shinwoo Kim, Portfolio Manager,

We have maintained our disciplined approach and remain focused where we believe we have an investment edge, specifically in the multiyear structural commodity call. We will follow what the data tell us, and it shows that oil productivity is still improving and has further room to run, pressuring the cost curve and leaving a challenged long-term outlook for energy stocks. As such, we remain meaningfully underweight energy to reflect our longer-term bearish view. The oil cost curve is influential in the cost curve of many other commodities and informs our bearish views on metals and mining, which is another significant underweight. Additionally, we continue to favor beneficiaries of commodity deflation?such as utilities, packaging, and specialty chemicals?and expect to retain a meaningful allocation to paper and forest products, where we see cyclical and secular tailwinds converging as the cost curve steepens to the advantage of low-cost producers while the growing emphasis on environmental, social, and governance (ESG) factors adds additional support to the industry.�

Given the numerous complex and uncertain cross currents in the commodity complex, we have found it important to remain true to our process. Our goal to is to deliver commodity exposure in a better risk-adjusted manner over time by investing in the right cost curves, companies, and valuations. Within the context of a longer-term view, we are navigating the highly uncertain nearer-term magnitude and duration of exogenous risks?which include weather-related issues, geopolitical events, and the lingering pandemic impact on supply chains?by assessing relative risk/reward and relative durability of the impact on various commodities while remaining consistent with our process. We have, therefore, been increasing our exposure to global gas/liquefied natural gas (LNG) and fertilizer/agriculture given our views outlined above.

Integrated Oil and Gas

Although current geopolitical events may continue to inflate oil prices in the near term, we believe the transition to renewable energy is a long-term headwind for entrenched players in this segment. Therefore, we choose to focus our exposure on high-quality companies with prudent management teams that make good capital allocation decisions.

  • One of our largest sells was in Galp Energia, which encountered a series of production challenges. These proceeds helped to fund our top purchase for the quarter in Shell, one of the largest global integrated oil companies. The war in Ukraine has resulted in an acute natural gas risk given Europe's dependence on Russian supply, and Shell has the largest exposure to LNG among the major integrated oil companies. We feel Shell will be able to benefit from a significant structural change in global gas logistics that will likely take time to take shape, keeping gas prices high in the process. We also believe that recent management changes could unlock value and lead to a higher multiple.
  • We trimmed our position in France-based TotalEnergies to manage position size, though it remains our largest holding within the segment. Despite near-term weakness due to exposure to Russia, we like the company's high-quality management team, capital discipline, strong balance sheet, and credible plan to deliver solid production growth in the coming years. These qualities and an attractive dividend yield make TotalEnergies appealing in an environment where we expect the cost curve for oil to remain under pressure going forward.

Oil and Gas Equipment and Services

The Russia-Ukraine conflict has exposed the energy security risks accompanying Europe's dependence on Russian energy. The full impact, magnitude, and duration of the war remains unknown; however, we believe the conflict has heightened a newfound global focus on energy security, particularly in Europe.

  • We initiated a position in Baker Hughes, one of the world's largest oil field services companies. The quality of the business has significantly improved in recent years. There is no easy solution for the gas/LNG supply needs in Europe, which means prices could remain elevated as the region gradually pivots away from Russian gas. With this backdrop, we believe Baker Hughes' differentiated exposure to LNG and infrastructure capabilities could drive margin upside with increased activity and tightening capacity.

Fertilizers and Agricultural Chemicals

Some of our largest purchases during the period were in this industry. Rising input costs and supply shortages have driven up the prices of fertilizers and other agricultural inputs. Concerns around high natural gas prices, an ingredient in fertilizer production, as well as shortages of potash and nitrogen have resulted in higher input costs that producers in this industry will pass on to consumers. Limited availability and elevated prices for fertilizers may also drive demand for agricultural chemicals as farmers seek to protect crop yield.

  • We initiated a position in Chile-based Sociedad Quimica, an integrated producer of lithium, iodine, and potassium-nitrate fertilizers. The company commands a high market share in each of the relatively consolidated businesses in which it operates. In addition to the potential margin uplift in its fertilizer business, we believe it could also benefit long term from the lithium upcycle driven by a growing supply-demand imbalance in electric vehicles amid increased adoption.
  • We added to Nutrien, a crop nutrient company that is the top global potash producer and agricultural retailer as well as a major nitrogen producer. Uncertainty around potash supply from Russia and Belarus has created expansion potential and pushed up incentive curves, which could benefit Nutrien's earnings. The company's retail segment distributes crop nutrients, crop protection products, seed, and merchandise, and could also help to provide some downside stability.
  • We also added to CF Industries, the largest low-cost nitrogen fertilizer producer in North America, as it could benefit in the current industry backdrop. We are attracted to CF Industries' risk/reward outlook and like its consistent, strong free cash flow generation, as well as the steps it has taken to strengthen its balance sheet.

Paper and Forest Products

We took advantage of attractive valuations to upgrade our exposure in our compelling investment ideas. A substantial increase in input costs, driven largely by supply bottlenecks as well as shortages in building materials, have proved challenging for the industry. However, demand continues to grow for paper packaging. We also continue to see the cost curve secularly steepening, as incremental supply from paper mill conversions and new pulp capacity required to meet incremental demand is getting increasingly more complex and therefore more capital intensive. This benefits the lower cost producers, driving an improved pricing and margin outlook. The increasing penetration of e-commerce and the trend toward replacing pollutive materials with wood-based alternatives further continues to gain traction in packaging and should create long-term demand tailwinds and improved pricing for the segment.

  • We added to UPM-Kymmene, a former graphic paper company based in Finland that is in the process of pivoting its business toward growing areas of the forest/paper supply chain, including pulp and bioproducts from waste wood, such as biochemicals and biofuels. The company has a strong balance sheet and is at the tail end of a major investment phase, with strong organic growth expected upon the completion of a large pulp mill. UPM's differentiated wood-based biofuels and bioplastics technology also offer significant carbon dioxide reduction relative to fossil-based alternatives.
  • We eliminated our position in Stora Enso?an integrated paper, board, and wood products producer?and took advantage of share price weakness to add to Svenska Cellulosa, the largest private forest owner in Europe. We see a reasonable path to generating significant value from its vast forest holdings as industrial capacity expansion in the region has positively influenced wood prices, which in turn drives forest land values. Svenska's wood products division is structurally more profitable than those of its peers. Wood-based products are expected to replace less sustainable alternatives as the energy transition gains traction and carbon capture emerges as part of the solution for the global climate crisis.

Diversified Metals and Mining

We remain underweight the industry and defensively positioned with the names in the portfolio, focusing on companies with solid balance sheets and sound records of capital allocation. In our view, a global oversupply of many base metals could be a headwind through much of the secular bear market in commodities. While we have a bearish view on diversified metals and mining, we have a favorable medium- to long-term outlook for copper prices, despite recent headwinds, because of the potential for demand to expand as the adoption of electric vehicles grows.

  • Near-term price weakness created an opportunity to add to our top holdings in this segment. We increased our stake in BHP, one of the largest diversified miners. BHP is a well-run company, and we like management's efforts to simplify the business. The company exited its oil and remaining thermal coal assets this year, which has improved its ESG profile. While exposure to iron ore is a secular risk, the industry is consolidated, and BHP could benefit amid limited supply. The company is also supported by potential upside from its copper business and shift to potash, an important growth area
  • We eliminated the portfolio's position in copper producer Antofagasta, which is facing deteriorating fundamentals amid another cycle of elevated capital spending, in favor of other investment opportunities.

Metal and Glass Containers

While a modest portfolio allocation, we think metal and glass packaging will continue to take market share from plastic because of superior recyclability. The industry has experienced significant headwinds recently, including cost inflation, fading tailwinds from the stay-at-home bump in beverage consumption, slowing growth expectations, and concerns of oversupply from a new entrant. However, we expect these challenges to abate in the near term as growth expectations recalibrate and the focus on sustainability sharpens.

  • We opportunistically increased the portfolio's stake in Ball Corporation, a leading manufacturer of aluminum packaging for beverages, foods, and household products. Ball is the highest-quality name in beverage cans with a consistent capital allocation framework. The company operates in a consolidated industry that includes multiyear supply contracts to fillers of carbonated soft drinks, beer, energy drinks, and other beverages, as well as a business structure that allows for cost pass-through to consumers.
31-Jan-2024 - Shinwoo Kim, Portfolio Manager,
After spending a decade underweight energy, the portfolio is now overweight versus the benchmark. In 2023, we saw incremental evidence that we are in the ending stages of the productivity wave in oil and natural gas and are approaching a more structurally positive environment for commodities. We have found that the market transition as productivity rolls over is often bumpy, so we are modestly overweight energy and metals, with a focus on companies that are high quality, high conviction and/or with idiosyncratic drivers.

Benchmark Data Source: MSCI. MSCI index returns are shown with reinvestment of dividends after the deduction of withholding taxes. MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Past performance is not a reliable indicator of future performance.

Source for performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures.

Daily performance data is based on the latest available NAV.  

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Please note that the Fund typically has a risk of high volatility.

Hedged share classes (denoted by 'h') utilise investment techniques to mitigate currency risk between the underlying investment currency(ies) of the fund and the currency of the hedged share class.  The costs of doing so will be borne by the share class and there is no guarantee that such hedging will be effective.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

A full list of the currently issued Share Classes including Distributing, Hedged, and Accumulating Categories may be obtained, free of charge and upon request, from the registered office of the Company.  

 

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Citywire Data Source: Citywire – where the fund manager is rated by Citywire, the rating is based on the manager’s 3-year risk adjusted performance. For further information on ratings methodology, please visit www.aboutcitywire.com.